TMI Tax Updates - e-Newsletter
September 6, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Services taxable earlier but exempted w.e.f 01.07.2012

   By: Meenu Garg

2. Alternate Minimum Tax on assessee other than company- An analysis

   By: DEVKUMAR KOTHARI

News

1. Income Tax Overseas Units.

2. Risk Management System For Trading in Stocks.

3. Investment Tracking System.

4. Rs. 86,000 Crore Indirect Tax Revenue Locked up in Litigation.

5. Raids by DRI.

6. Increase in Number of Foreign Companies.

7. NABARD Loan to Energy Projects.

8. 19 Entities Restrained From Securities Market Trading.

9. Complaints Regarding Sanction of Education Loan.

10. Setting up of NIMZs.

11. UNIDO Findings on Industrial Growth.

12. Circulation of Draft IPR for Inter-Ministerial Consultation.

13. Growth of Rubber Cultivation.

14. Import of Areca nuts.

15. International Trade Centre in J&K.

16. Easy Loan to Poor And Weaker Sections.

17. LIC Social Security Scheme.

18. Restructuring Corporate Debt.

19. Relaxation of NBFC Norms.

20. NABARD Loan to Energy Projects.

21. CLB Action Streamlines Notarial Malpractices in NCT Delhi.

Circulars / Instructions / Orders

Companies Law

1. 28 - dated 3-9-2012

Filling of Balance Sheet and Profit and Loss Account by companies in Non-XBRL for accounting year commencing on or after 01.04.2011.

Highlights / Catch Notes

Income Tax

• Income-Tax Department Recognized as Creditor, Can Object to Claims Against Transferor Company Under Tax Obligations.

  Case-Laws - HC : If any amount is required to be payable to the Income-tax Department by the transferor company, the Income-tax Department can be said to be a creditor so far as its claim against the transferor company is concerned. Considering the same, it cannot be said that the Income-tax Department has no locus to put forward its objections in this behalf. - HC
  Visit to Get Source

  ---

• Tax Credit Excludes Surcharge and Education Cess under MAT Section 115JAA; Applies Only to Income Tax Paid.

  Case-Laws - AT : Disallowance of credit of surcharge and education cess - MAT u/s 115JAA - if only income tax is paid under the provisions of section 115JB it is natural that tax credit u/s 115JAA will only be of income tax and not of surcharge and education cess - AT
  Visit to Get Source

  ---

• Court Rules Rent Arrears Are Taxable Only in Year Received, Not When Due; Assessee Wins Mesne Profits Case.

  Case-Laws - HC : Reopening of assessment - the arrears of rent received by the assessee (as mesne profits) could not be brought to tax for the previous years, when they fell due. They could be brought to tax only during the year of receipt - HC
  Visit to Get Source

  ---

• Court Rules Tax Authorities Can't Demand More Evidence Once Document Truth Presumed in Seizures.

  Case-Laws - HC : Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true, the revenue could not have, consistently with that presumption, proceeded to require the assessee to produce materials in support of the expenditure entries - HC
  Visit to Get Source

  ---

• Legal System Ensures Fairness: Law Can't Demand Impossible Actions, Especially in Tax Compliance.

  Case-Laws - AT : The law cannot possibly compel a person to do something which is impossible to perform - AT
  Visit to Get Source

  ---

• Reassessment u/s 147 Not Allowed if Issue Previously Settled Without New Evidence.

  Case-Laws - HC : Reopening of assessment u/s 147 - once that aspect of the matter had been gone into in the earlier round, it was not open to the AO to reagitate it in the second round without any other / fresh material - HC
  Visit to Get Source

  ---

• Interest Accrues on Seized Assets if Decision Not Made Within 120 Days of Seizure Date.

  Case-Laws - HC : Claim of interest - If a decision to hold or withhold monies/assets discovered during a Search is not taken with the prescribed period of 120 days, interest would start to run from the date of the Seizure itself - HC
  Visit to Get Source

  ---

• Supreme Court to Decide Tax Treatment of Compensation from Takeover Consent Decree: Income or Capital Receipt?

  Case-Laws - SC : Taxability on Compensation received under consent decree in this civil appeal - takeover arrangement - Income from other sources OR capital receipt - SC
  Visit to Get Source

  ---

• Company Only Liable for Ad Expense Reimbursement if Individual Demands It; No Demand, No Obligation Added.

  Case-Laws - HC : Reimbursement of advertisement expenses - Even assuming that he is entitled to reimbursement of the marketing expenses, the liability of the company to pay him the said would arise only in the event of his having demanded the same - no addition - HC
  Visit to Get Source

  ---

• Section 54F Deduction: Investment Timing Crucial for Tax Relief; Source of Funds Irrelevant if Conditions Met.

  Case-Laws - AT : Disallowance of the deduction U/s. 54F - money has no colour and all that is required to be eligible for relief under S.54F of the Act is compliance with the condition of investment within the specified time. - AT
  Visit to Get Source

  ---

• Educational Institution's Exemption Request u/s 11 Denied Due to Lack of Condition Verification.

  Case-Laws - AT : Educational Institution - exemption u/s 11 - Assessee’s argument that the benefit of S.11 should be granted in the alternative, without verification of conditions specified in S.11 of the Act, cannot be accepted on its face. - AT
  Visit to Get Source

  ---

• Section 68: No Addition Needed if Donors Confirm Gift Under Oath and Through Banking Channels.

  Case-Laws - AT : Addition u/s 68 - when the donors were examined by the Assessing Officer on oath and they conformed the transaction of gift through banking channel and by cheques, than there is no scope of any doubt of identity and creditworthiness of the donor. - AT
  Visit to Get Source

  ---

• Court Confirms Sale and Leaseback Transactions Are Genuine; No Evidence of Sham by Department Found.

  Case-Laws - HC : Sale and a lease back transaction - the lease transactions were genuine and that the Department failed to adduce any evidence to prove that the transaction was not genuine or was a sham no disallowance can be warranted - HC
  Visit to Get Source

  ---

• High Court Rules Payment for "VESESH" Name and Intellectual Properties as Capital Expenditure.

  Case-Laws - HC : Payment made for acquiring the name of ‘VESESH’ and intellectual properties, copy right - The said amount has to be treated as capital expenditure.- HC
  Visit to Get Source

  ---

• Court Upholds Assessee's Deductions u/ss 80-IA and 80-IB; Revenue's Sales Diversion Argument Rejected.

  Case-Laws - HC : Disallowance of deduction u/s 80-IA & 80-IB - the contention of the revenue that the assessee has not conducted any business at Silvassa and the assessee has diverted the sales and profit from the other Units cannot be accepted - HC
  Visit to Get Source

  ---

• Rental Income Assessed Using Higher Value Between Municipal Rateable Value and Actual Rent for House Property Income.

  Case-Laws - AT : Rental income - Municipal rateable value shall be taken into consideration for determining the ALV comparing it with the actual rent whichever is higher shall be taken it as income under the head income from house property. - AT
  Visit to Get Source

  ---

• Court Confirms 0.81% of Ship Breaking Recovery from Non-Ferrous Scrap Sales as Additional Income for Respondent Assessee.

  Case-Laws - HC : Addition income from sale of scarp on ship breaking - 0.81 % of the total recovery being attributed to non ferrous scrap generated during the course of ship breaking by the respondent assessee was correct - HC
  Visit to Get Source

  ---

• Section 115J: AO Cannot Dispute Certified Profit & Loss Accounts for Tax Assessment Purposes.

  Case-Laws - AT : MAT - AO while assessing a company for income tax under section 115J of the Act, cannot question the correctness of the profit and loss account prepared by the assessee company and certified by the statutory auditors - AT
  Visit to Get Source

  ---

• AO Miscalculates Taxable Income by Misinterpreting TDS Certificate; Real Income vs. Payment Receipts Needs Clarification.

  Case-Laws - AT : Mismatching of TDS receipts with P&L account - AO has considered the entire payment as per TDS certificate as income and has failed to appreciate what is liable is income, real profit and not payment received by the assessee. - AT
  Visit to Get Source

  ---

• Rectification u/s 154 is unsuitable for resolving complex issues like FBT and ESOP taxability u/s 115WB(1)(a).

  Case-Laws - AT : Rectification u/s 154 – FBT - as the taxability or otherwise of an ESOP expenditure u/s 115WB(1)(a) is highly debatable issue and such issue cannot be adjudicated in the proceedings u/s 154 - AT
  Visit to Get Source

  ---

Customs

• High Court Rules Against Arbitrary DEPB Scheme Restriction Imposed in 2011; Deems Condition Unfair and Unreasonable.

  Case-Laws - HC : The petitioner is disentitled to the benefit of the DEPB scheme by virtue of a restriction imposed on 22-9-2011, made effective nine days later. - To inflict such an arbitrary condition, which is declared to be legally unsustainable, and yet insist that during the interregnum a fresh condition operates to deny the citizen the relief he is justly entitled to, is unfair and unreasonable. - HC
  Visit to Get Source

  ---

• Tribunal Rules: Authorities Cannot Withhold Bank Guarantees or Refunds; Decision is Final.

  Case-Laws - HC : Decision of the Tribunal having assumed finality, is not open to the respondent authorities to either withhold release of the bank guarantees or to withhold refund - HC
  Visit to Get Source

  ---

• Detention Order Overturned After Unexplained 15-Month Delay in Issuance.

  Case-Laws - SC : Delay in filing Order of detention - In the absence of proper explanation for a period of 15 months in issuing the order of detention, the same has to be set aside - SC
  Visit to Get Source

  ---

Corporate Law

• Companies Must File Financials in Non-XBRL Format for Years Starting April 1, 2011, Per Companies Law Update.

  Circulars : Filling of Balance Sheet and Profit and Loss Account by companies in Non-XBRL for accounting year commencing on or after 01.04.2011. - Circular
  Visit to Get Source

  ---

Service Tax

• Maharashtra VAT Act Amendment: Coercive Tax Recovery Measures Stayed for Developers Until October 31, 2012, per Section 2(24).

  Case-Laws - SC : As per amendment in section 2(24) of Maharashtra Value Added Tax Act, 2002 w.e.f. June 20, 2006 on or before October 31, 2012, the coercive process for recovery of tax, interest or penalty shall remain stayed in case the concerned developers - SC
  Visit to Get Source

  ---

• Marketing Services by GIPL and Abacus Classified as "Business Auxiliary Services" u/s 65(19) of Finance Act 1994.

  Case-Laws - AT : Activity appears to be the marketing and promotion of the services being provided by the GIPL and Abacus and hence, the same appears to be covered by the definition of “Business Auxiliary Services” under Section 65(19) of the Finance Act, 1994- AT
  Visit to Get Source

  ---

• Court Rules on Inclusion of Material Costs in Photographic Services Tax; Extends Limitation Period for Reassessment.

  Case-Laws - AT : Extended period of limitation – whether the cost of materials used in providing photographic services is required to be added in assessable value or nor - benefit of extended period of limitation granted - AT
  Visit to Get Source

  ---

• Commissioner Revises Order, Imposes Penalties u/ss 77 & 78, Finance Act 1994 on Service Tax Regulations.

  Case-Laws - AT : Penalty - suo motu revision of order passed by learned Commissioner under Section 84 of the Finance Act, 1994 imposing penalty under section 77 of the said Act followed by penalty under Section 78 - AT
  Visit to Get Source

  ---

Central Excise

• Rule 11(3) CENVAT Credit Rules 2004: Reversal Required for Duty on Inputs, Not for Capital Goods or Input Services.

  Case-Laws - AT : Rule 11 (3) of CENVAT Credit Rules, 2004 specifically provides for only reversal of CENVAT Credit taken on the duty paid on the inputs and the said rule is silent about the reversal of CENVAT Credit taken of Central Excise duty paid on capital goods as well as on the Service Tax paid on the input services - AT
  Visit to Get Source

  ---

• Citing Rule 57C Instead of Rule 57H(7) Doesn't Invalidate SCN; Cenvat Credit Demand is Upheld.

  Case-Laws - AT : Since the correct facts had been narrated in the SCN hence citation of Rule 57C and not Rule 57H(7), would not vitiate the SCN. Cenvat credit demand upheld. - AT
  Visit to Get Source

  ---

• Pre-fabricated Segments and Launching Trusses Classified Under Tariff Code 73084000: Eligibility for Benefits Under Notification 3/05-CE Evaluated.

  Case-Laws - AT : Pre-fabricated segments and launching trusses - since the goods have been held to be classifiable under 73084000, the eligibility for notification no. 3/05-CE would have to be considered for which it has to be ascertained - AT
  Visit to Get Source

  ---

• Condonation Denied: Tribunal's Later Judgment on Supreme Court Dismissal Doesn't Reopen One-Year Delay Case.

  Case-Laws - AT : Plea for condonation of delay of one year seven months by Department - As such, the issue now cannot be reopened only because in a subsequent judgment, the Tribunal has taken view that in-limine dismissal of appeal by the Supreme Court does not lay down any law - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2012 (9) TMI 100
  Scheme of demerger - objection of Income-tax Department that the Scheme in question is floated with the sole object of avoiding the tax liability such as Income-tax, Stamp Duty, VAT, etc. and that the sole object is only to avoid capital gains tax - assessee contested that it is only the Central Government through Regional Director which is vested with the powers to raise the objections qua the Scheme and the Income-tax Department has no locus to raise such objections - Held that:- If any amount is required to be payable to the Income-tax Department by the transferor company, the Income-tax Department can be said to be a creditor so far as its claim against the transferor company is concerned. Considering the same, it cannot be said that the Income-tax Department has no locus to put forward its objections in this behalf. The segregation of telecommunications services and telecommunications infrastructure business reflects the global trend and has been adopted by telecommunication companies in India without objection. In fact, the Working Group under the Planning Commission has recommended sharing of infrastructure, and the present Scheme reserves flexibility to it for easing such process when required. It may be relevant to note that even the Central Government has not raised any objection to the Scheme and even the Department has not contended that the aforesaid objectives are imaginary. Therefore it cannot be said that the Scheme has no purpose or object and that it is a mere device/subterfuge with the sole intention to evade taxes, particularly when even the incidence of tax purportedly sought to be evaded is not established on facts. Transfer is void for want of consideration - Held that:- On agreeing with the view taken by the Delhi High Court that even if the consideration of one rupee can be said to be a valid consideration and it is not necessary that consideration is always a monetary consideration. In such type of cases wherein the reconstruction involves give and take and mutual/reciprocal promises and obligations, which can be said to be consideration for each other and it cannot be said that there is absolutely no consideration so far as Scheme of Arrangement is concerned. As approval accorded by the equity shareholders, secured and unsecured Creditors of the petitioner and the Regional Director, Western Region to the proposed Scheme of Arrangement, as well as the submissions of the Income Tax Department, sanction is hereby granted to the Scheme of Arrangement under Sections 391 and 394 of the Companies Act, 1956 while protecting the right of the Income Tax Department to recover the dues in accordance with law irrespective of the sanction of the Scheme. However, while sanctioning the Scheme it is observed that said sanction shall not defeat the right of the Income Tax Department to take appropriate recourse for recovering the existing or previous liability of the transferor company and the transferor company is directed not to raise any issue regarding maintainability of such proceedings in respect of assets sought to be transferred under the proposed Scheme and the same shall bind to transferor and transferee company. The pending proceedings against the transferor company shall not be affected in view of the sanction given to the Scheme by this Court as the rights of the Income Tax Department of assessing, levying and collecting tax from the Appellant are not confiscated or expropriated so as to extinguish such rights.

  ---

• 2012 (9) TMI 99
  Disallowance of credit of surcharge and education cess - MAT u/s 115JAA - Held that:- Section 115JB clearly talks that such book profit shall be deemed to be total income of the assessee and tax payable by the assessee on such total income shall be the amount of income tax at specified rate of tax which was 15% for the relevant year under consideration. The section does not talk about the income tax as increased by surcharge & education tax. It talks about only income tax. Therefore if only income tax is paid under the provisions of section 115JB it is natural that tax credit u/s 115JAA will only be of income tax and not of surcharge and education cess - against assessee. Interest u/s 234B & 234C - Held that:- As it is a mandatory provision and is consequential in nature and in view of our adjudication on ground 1 as decided against the assessee

  ---

• 2012 (9) TMI 98
  Reopening of assessment - assessment was completed on the basis of enhanced annual letting value - decree was for mesne profits - Held that:- The “right” of a plaintiff/owner seeking possession and mesne profits (which were to be calculated and decreed after an enquiry) as “only an inchoate right”. Such being the case, the assessee could not be faulted in not quantifying the potential mesne profits likely to accrue in the future - the newly introduced Section 25-B was clarificatory in nature, as it encapsulated the law existing (i.e. that receipts towards mesne profits should be taxed in the year of their receipt). There is no infirmity in the findings of the Tribunal that even on merits, the arrears of rent received by the assessee (as mesne profits) could not be brought to tax for the previous years, when they fell due. They could be brought to tax only during the year of receipt - as during the year of receipt, the assessee had shown the amount so received as capital because character was clearly as that of income, as is evident from the ruling as decided in P. Mariappa Gounder Versus Commissioner of Income-Tax [1998 (1) TMI 3 - SUPREME COURT] liability became ascertained only with the order of the trial court comes and not earlier - thus as the revenue had not however, re-opened the assessment in respect of the year of receipt of the amounts the reopening of assessment is not warranted - in favour of assessee.

  ---

• 2012 (9) TMI 97
  Addition on unaccounted income - disallowance of expenditure towards commission payments, sundry expenses and green box expenses - Held that:- Once the revenue seeks to draw a presumption, by relying on Section 132 (4A) that presumption has to be given full effect, thus if the correctness of the contents of books and other materials is to be presumed, such a deemed state of affairs would have to be assumed in respect of all entries in the books, and not merely the entries of income (or receipts). If the revenue was of the opinion that the expenses claimed towards “green boxes” was inadmissible or was excessive, or not genuine, in order to reject the entries in the books of account and other documents of the assessee, seized during the search, it ought to have relied on other materials. Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true, the revenue could not have, consistently with that presumption, proceeded to require the assessee to produce materials in support of the expenditure entries - as suspicion cannot replace proof, thus in the absence of any materials, in the form of documents, the revenue could not have denied the benefit of any expenses which would otherwise have inured to the assessee, as an allowable deduction under Section 37 (1) - So far as the heads of expenses are concerned, the revenue was unable to show how any of them were prohibited by law, or amounted to offences - in favour of assessee.

  ---

• 2012 (9) TMI 96
  Non reflecting the income as shown in the TDS certificates - miscellaneous application - Held that:- Dismissal of Miscellaneous application holding that so far as the issue of TDS certificates are concerned, nothing had been submitted before the Bench, during the course of hearing, on 29.06.2009 leading to the order dated 04.08.2009. The Tribunal also held that as the appellant had already filed an appeal against the order dated 04.08.2009 to this court and the same is pending, it would not be appropriate for them to readjudicate the matter. Remanding the matter to the AO would not serve any purpose, as the appellant had consciously claimed credit of tax deduction on the basis of the TDS certificates and even enclosed the same along with the return of income, but failed to show it, as a part of the income. This entire excess income of Rs.19.22lacs would have not come to light but for the AO verifying each TDS Certificate. The return of income was duly signed and verified by the Directors of the company. In view of the above facts, the Tribunal concluded that no useful purpose would be served by remanding the matter back to the Assessing Officer - against assessee.

  ---

• 2012 (9) TMI 95
  India-Thailand DTAA - Disallowance of Transponder Service Fee and consultancy charges - non deduction of TDS - Held that:- Disallowance on relying on explanation 5 to sec.9(1)(vi) and Explanation 6 to sec.9(1)(vi) cannot be warranted as the assessee cannot be held to be liable to deduct tax at source relying on the subsequent amendments made in the Act with retrospective effect. In the said case, Explanation to sec.9(2) was inserted by the Finance Act, 2007 with retrospective effect from 1.6.1976 and it was held by the Tribunal that it was impossible for the assessee to deduct tax in the financial year 2003-04 when as per the relevant legal position prevalent in the financial year 2003-04, the obligation to deduct tax was not on the assessee - the law cannot possibly compel a person to do something which is impossible to perform - in favour of assessee. Disallowance of higher rate of depreciation on vehicles given on lease - Held that:- Considering the Tribunal's order in assessee's own case for AY 1998-99 the matter is restored back to the file of the AO to decide the same afresh after giving the assessee an opportunity to produce all the evidence to support and substantiate its claim for higher rate of depreciation on the vehicles given on lease - in favour of assessee for statistical purposes. Disallowance of bad debts written off - Held that:- As decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough of the bad debt is written off as irrecoverable in the accounts of the assessee - in favour of assessee.

  ---

• 2012 (9) TMI 94
  Reopening of assessment u/s 147 - non disclosure of existence of the permanent establishment and business connection in India - assessee contested against second occasion on which a notice u/s 148 has been issued - Held that:- As it is evident that the question of the petitioner having a permanent establishment in India had been gone into in the first round as apparent from the reasons dated 29.03.2007 read with the objections dated 14.09.2007 and the order dated 30.11.2007 and ultimately the assessment order dated 31.12.2007, wherein the lower rate of tax of 15% was employed - as throughout the proceedings in the earlier round, one of the questions that had been raised was with regard to the petitioner having a permanent establishment in India, once that aspect of the matter had been gone into in the earlier round, it was not open to the AO to reagitate it in the second round without any other / fresh material - the condition stipulated in the proviso to Section 147 is not satisfied and, therefore, the notice dated 30.03.2010, being admittedly beyond four years from the end of the relevant assessment year (i.e., 2003- 04), is barred by limitation - in favour of assessee.

  ---

• 2012 (9) TMI 93
  Claim of interest for inordinate delay in releasing amount u/s 132-B (3) - Held that:- If a decision to hold or withhold monies/assets discovered during a Search is not taken with the prescribed period of 120 days, interest would start to run from the date of the Seizure itself - the reasonable and equitable rate of interest having regard to the circumstances would be 12%. A sum of Rs.33,72,907/- was adjusted against the demand outstanding against the petitioner’s brother vide letter dated 23.02.2007 - Held that:- The position of the respondents in adjusting Rs.33,72,907/- even for the purpose of payment of interest liability is clearly unwarranted as the assessment was completed on 26.12.2006, therefore, while calculating the interest, the respondents were clearly alive to this specific fact and in fact it worked out to a sum of Rs.7,42,616/- in these circumstances, the Court sees no justification in reducing that amount on the basis of the later event i.e. the adjustment under Section-132B (i) made on 23.02.2007. The liability as on 26.12.2006 was in respect of the whole amount of Rs.92,82,700/-. Thus the petitioner is entitled to interest for the period of 16 months on the total amount of Rs.92,82,700/- which works out to Rs.7,42,616/- after adjusting the sum of Rs.4,72,783/- paid on 11.5.2012. The balance shall be paid over to the writ petitioner within a period of four weeks from date of Order - in favour of assessee. The petitioner is entitled to interest @ 12 % p.a. on the balance sum of Rs.59,09,793/- for the period 1.3.2007 till 1.3.2011. These amounts shall be paid over to the petitioner within six weeks from date of Order - in favour of assessee. The concerned AO/Commissioner shall give a hearing to the petitioner with regard to the adjustment made under Section-132 B (1) (i) in respect of the sum of Rs.33,72,907/- by order dated 23.02.2007 and make a speaking order within two months from date of Order -in favour of assessee for statistical purposes.

  ---

• 2012 (9) TMI 92
  Taxability on Compensation received under consent decree in this civil appeal - takeover arrangement - Income from other sources OR capital receipt - Held that:- The matter needs to be remitted to the AO to consider various documents, such as Letter of Offer made for Fully Convertible Debentures, Resolution of the Board of Directors of the respondent when they applied for Fully Convertible Debentures, the terms and conditions on which the debentures were issued and the circumstances under which the debentures would get converted into shares, the pleadings in the suit, the Resolution of the Board of Directors of the respondent-Company when they agreed to give up their right to takeover M/s. Jenson and Nicholson Limited for a sum of Rs.75,00,000/- and whether there was any transaction, apart from the consent decree - case requires for de novo consideration in accordance with law.

  ---

• 2012 (9) TMI 91
  Undisclosed income on account of royalty - ITAT deleted the addition as not assessable under Chapter XIV B of the Income Tax Act, 1961 - Held that:- The respondent had, in fact, not received any royalty with effect from October, 1999. Indeed, the appellant has not been able to indicate any evidence to the contrary. There is, however, nothing to indicate that the share-holder's agreement dated 17th November, 1999, between the respondent and BIIL was sham and bogus nor is there anything to indicate that the agreement was not implemented. As the trademark stood transferred to Jyothy Laboratories Limited, there would be no question of it continuing to pay royalty to the respondent - there was no undisclosed income and it is not even contended that these agreements were sham or bogus. Nor is it suggested that they were a device to launder money through BILL - no substantial question of law - in favour of assessee. Addition on account of reimbursement of advertisement expenses - Held that:- There is no material evidencing a reimbursement of the expenses to the respondent - this is a case where the respondent himself owns a large majority of the equity capital of the company and it would not, therefore, be unnatural for him not to have demanded the payment. Under clause 16(iii), the company was bound to reimburse the respondent only “on demand” from the respondent. The fact that the respondent's accounts are maintained on a mercantile basis would make no difference. Even assuming that he is entitled to reimbursement of the marketing expenses, the liability of the company to pay him the said would arise only in the event of his having demanded the same - that the primary facts were also disclosed in the books of accounts of the respondent as well as the company and that the AO was, therefore, not justified in making an addition in the block assessment - both the issues would not fall under the purview of Chapter-XIV B of the Act as no evidence was found during the course of search which would warrant their consideration only in the block assessment order - in favour of assessee.

  ---

• 2012 (9) TMI 90
  Dis-allowance of deduction u/s 80HHC on export incentives being DEPB and DFRC - Held that:- Issue is settled in favor of assessee by the Judgment in the case of M/s Topman Exports V/s CIT (2012 (2) TMI 100 - SUPREME COURT OF INDIA) wherein it was held that only "Profit" element embedded in the consideration received on transfer of DEPB would be taxable under Clause (iiid) of Section 28 at the time of calculation of deduction u/s 80HHC. Matter restored to file of AO for re-computation of deduction u/s 80HHC - Decided in favor of assessee

  ---

• 2012 (9) TMI 89
  Deduction u/s 10B - 100% EOU – adjustment made u/s 10B(7) r.w.s 80-IA(10) on ground that business between the Appellant and associated enterprises has been so “arranged” for earning more than ordinary profits which might be expected to arise in such eligible business - no revision in the ALP recommended by the Transfer Pricing Officer, however his clarificatory order mentioned that the excess profit shown by the assessee had to be considered for taxation - Held that:- Provisions of S80-IA(10) do not give an arbitrary power to the A.O. to fix the profits of the assessee. The A.O. has to specify as to why he feels that the profits of the assessee are being shown at a higher figure. Hence, A.O. is directed to re-work the deduction u/s 10B considering the profits shown by the assessee in Form No.56G filed by it. Addition as TP adjustment, while at the same time denying deduction u/s 10B on said sum, considering it to be excess profit - Held that:- Where computation of income was done, considering the ALP for the international transactions then the computation that has to be considered is one done based on the entries made in the books in respect of such international transactions. Assessee here had profits which were in excess of the profits of the comparable cases. This addition, therefore, stands deleted. Period of limitation – assesse contended that there being no transfer pricing adjustment, order u/s 143(3) itself ought have been passed before 31.12.2010, hence draft assessment order and all proceedings subsequent thereto became invalid – final assessment order passed on 27.9.2011 – Held that:- Reference made to the TPO, the order passed by the TPO, the draft assessment order passed by the Assessing Officer and the directions issued by the DRP are all pre-assessment procedures of aid and guidance provided to the assessing authority by the statute. If any irregularity is committed by the Assessing Officer in following the above set of pre-assessment procedures, such irregularity does not make the assessment order illegal. At the best, it makes the order only irregular. Ground stands dismissed. Deduction u/s 10B – denial even in respect of certain sale proceeds which were brought into India within the time limit prescribed u/s 10(3) on ground that receipts were in names which did not exactly tally with the names of the clients – Held that:- Since assessee could establish receipt of Rs. 4,04,94,820/- out of total exclusion of Rs. 7,05,40,982/- , exclusion is limited to a sum of Rs. 3,00,46,162/- being difference between Rs. 7,05,40,982/- and Rs. 4,04,94,820/-. However in case of exclusion of sale proceeds which were not mentioned in the draft assessment order u/s 144C and were excluded only in the final assessment on direction of DRP of further verification, it was held that DRP had no powers to issue directions which gave scope for “further enquiry”. Departure from the draft assessment order in a substantial manner so as to include items which were not originally considered, cannot be done On grievance of the assessee that the amounts which have been excluded from export turnover on account of non-realization within the time specified u/s 10B(3) ought have been excluded from total turnover for computation of deduction u/s 10B it is held that if unrealized export proceeds were excluded both from export turnover and total turnover, insofar as an assessee which was having only export sales, the export profit deductible u/s 10B, will remain same. Moreover, “total turnover” include all items which are business receipts. Same cannot be excluded from total turnover – Decided against assessee Exclusion of expenses incurred in foreign exchange and telecommunication expenses incurred in Indian currency from export turnover – assesse contending non-exclusion on ground that such expenses were not included in the export turnover at all - Held that:- When the expenses were incurred for delivery of computer software outside India, even if the assessee had not invoiced such amounts specifically in its bills raised on its customers abroad, the amounts would have definitely been fixed. Just because the invoices raised did not specifically mention recovery of telecommunication charges, we cannot say that the billed amounts were exclusive of such telecommunication charges. Further, Special Bench in case of Sak Soft Ltd (2009 (3) TMI 243 - ITAT MADRAS-D ) gave a final ruling of exclusion of freight, telecommunication charges or insurance incurred in Indian currency as well. Condition regarding incurring of the expenses in foreign exchange was limited only to technical services outside India. Nevertheless, A.O. is directed to exclude such amounts both from export turnover as well as from total turnover - Decided partly in favor of assessee

  ---

• 2012 (9) TMI 88
  Disallowance of the deduction U/s. 54F - amounts deposited in capital accounts scheme out of the borrowed funds - Held that:- As decided in Muneer Khan Versus Income-tax Officer, Ward No. 7(2), Hyderabad [2010 (8) TMI 752 - ITAT HYDERABAD] that money has no colour and all that is required to be eligible for relief under S.54F of the Act is compliance with the condition of investment within the specified time. As the capital gains earned by the assessee can be utilized for other purposes, and as long as the assessee fulfills the condition of investment of the equivalent amount in the scheme specified or in the asset qualifying for relief under S.54F, by securing the money spent out of the capital gains or from other sources available to it either by borrow or otherwise, and the assessee are eligible for relief under S.54F in respect of the entire amount of capital gains so deposited - in favour of assessee

  ---

• 2012 (9) TMI 87
  Educational Institution - exemption u/s 11 provided in absence of approval under sub-clause (vi) to the section 10(23C) – Revenue contesting the same and contended that approval under sub-clause (vi) to the section 10(23C) is distinct from registration u/s. 12A – Held that:- Assessee’s argument that the benefit of S.11 should be granted in the alternative, without verification of conditions specified in S.11 of the Act, cannot be accepted on its face. Following consistent view taken by the coordinated benches of Tribunal, in similar matters, including in assessee’s own cases for earlier years, we set aside the impugned order of the CIT(A) and restore the matter to the file of the AO with a direction to verify the aspect of donation, capitation fee etc. if any collected by the assessee, and further direct that if it is found that besides fulfilling other prerequisites for exemption under S.11, the assessee has not charged any money by whatever name it is called, i.e. donation, building fund, auditorium fee etc, over and above the prescribed fee for the admission of students, the assessee would be entitled for exemption under S.11, even though the notification under S.10(23C)(vi) have not been received by it. We direct accordingly – Decided partly in favor of Revenue for statistical purposes

  ---

• 2012 (9) TMI 86
  Addition made u/s. 69C - survey conducted u/s. 133A - Held that:- It is seen from the Agreement of Sale that an agreement is entered into between Shri N.R. Srinivas and others on the one hand and the assessee-company and Shri M. Sudhakar Reddy on the other hand for purchase of 12 acres 38 guntas of agricultural land for a total consideration of Rs. 1.95 crores, thus when the Agreement of Sale as well as the cash receipts indicate that the assessee-company is not the only one but transaction for purchase was made jointly with others addition should not have been made at the hands of assessee alone. As one of the promoters of the company had claimed that the entire amount of Rs. 1.95 crores was advanced by him for payment to the vendors with the confirmation letter it was the duty of the AO to make proper enquiry for finding out the genuineness of the confirmation letter and claim of payment but neither the promoter was summoned for examination nor has made any attempt to find out whether sufficient fund was available with promoter for making payment of Rs. 1.95 crores in cash - restore the matter back to the Assessing Officer who shall conduct necessary enquiry with regard to the payment - in favour of assessee for statistical purposes. Disallowance made u/s. 40 (a) (ia) - Held that:- As decided in case of Merilyn Shipping & Transports [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] section 40(a)(ia) is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which are already been paid during the previous year, without deducting tax at source - Since the amount has been paid during the relevant previous year, no disallowance could be made u/s. 40 (a) (ia) - in favour of assessee.

  ---

• 2012 (9) TMI 85
  Addition by invoking the provisions relating to the Transfer Pricing - assessee seeks stay of recovery of outstanding demand pending hearing - Held that:- The assessed income of Rs.14.49 crores by TPO is nearly twice the returned income of Rs.8.29 crores - the recovery proceedings under S.220(6) were initiated without attending to or expressly rejecting the stay application filed by the assessee before the AO, thus this approach is certainly not appreciated In the manner of picking up the comparables for applying the TNMM method and rejecting the comparables provided by the assessee there exists a lack of transparency as AO should have provided opportunity as to why the comparables relied upon by the assessee are not acceptable. And the objections raised by the assessee before the lower authorities were not met by passing a speaking order - the assessee deserves grant of conditional stay on paying the whole of the tax component if easy instalment is granted - partly in favour of assessee.

  ---

• 2012 (9) TMI 84
  Addition u/s 68 - unexplained cash credits - gifts received from NRIs and persons other than NRIs - Held that:- In respect of gifts given by the non-NRI donors the same has been duly proved by the assessee by producing the donors before the AO along with all relevant evidence viz confirmation letter/affidavit, acknowledgement of return, balance sheet and capital account. Further when the donors were examined by the Assessing Officer on oath and they conformed the transaction of gift through banking channel and by cheques, than there is no scope of any doubt of identity and creditworthiness of the donor. However, as regards the gift given by few NRI donors, the matter is remanded to the record of the AO and the assessee is directed to produce the statement of bank account of the these donors or the donors in person for verification and examination - Decided partly in favor of assessee

  ---

• 2012 (9) TMI 83
  Disallowance on account of commission paid to two partners who possessed certificate of diploma in pharmacy - commission paid to a partner who is not a working partner is not allowable in the case of assessment of the firm - commission which could be considered as part of remuneration is allowable in case the same is authorized by the partnership deed. If the partnership deed has not authorized, then the same cannot be considered for deduction in the assessment of the firm - in favour of the revenue

  ---

• 2012 (9) TMI 72
  Levy of interest u/s 234B - held that:- when the quantum assessment itself was remanded particularly with reference to the expenditure vis-a-vis unaccounted money, the liability to pay the interest has to await the assessment to be computed in terms of the directions of the Tribunal. Merely because the cash found at the time of search was of Rs.26 lakhs only the same would not per se justify the contention of the assessee that the seized materials could not form the basis of the assessment treating the cash payment of the transaction at Rs.84.50 lakhs - The fact that the Revenue recovered Rs.25.80 lakhs at the time of search and they had received 50% of the cash payment alone would not discredit what had been noted in the seized materials noting on the cash payment of the transaction - as the quantum assessment itself was remanded particularly with reference to the expenditure vis-a-vis unaccounted money, the liability to pay the interest has to await the assessment to be computed in terms of the directions of the Tribunal - against assessee.

  ---

• 2012 (9) TMI 71
  Disallowance of bad debts - ITAT allowed the claim - Held that:- As decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] that after 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - as the certificate accepting the VDIS declaration was issued by the Commissioner after consultation with the Central Board of Direct Taxes and, therefore, the contention on behalf of the Revenue that assessee is not entitled to rely on VDIS declaration would not be tenable in law - in favour of assessee. Disallowance of claim of depreciation - sale and a lease back transaction - IATA allowed it - Held that:- As the assessee has submitted the necessary evidence for the purchase and use of the machineries during the year the lease transactions were genuine and that the Department failed to adduce any evidence to prove that the transaction was not genuine or was a sham no disallowance can be warranted - the contention of Revenue that the Tribunal blindly followed the decision in Unimed Technologies Ltd. Versus Deputy Commissioner Of Income-Tax [1999 (4) TMI 104 - ITAT AHMEDABAD-A] in spite of the facts being different, would not be tenable - in favour of assessee.

  ---

• 2012 (9) TMI 70
  Disallowance of deduction u/s 80-IA & 80-IB - SILVASSA unit did not produce or manufacture articles or thing as contemplated under Section 80-IA(iv) - Held that:- The Sales Tax Authorities of Dadra and Nagar Haveli verified the books of accounts and after fulfilling all the conditions imposed, sales tax exemption was given. The Sales Tax Authorities are primarily interested in collecting the sales tax. In the instant case, being fully satisfied by themselves that the assessee has fulfilled all the conditions, the exemption has been given. Hence the contention of the revenue that the assessee has not conducted any business at Silvassa and the assessee has diverted the sales and profit from the other Units cannot be accepted As the software products are different from other commercial products and development of the software can be undertaken in a short span of time, thus disallowance on ground that within 18 days of establishment of new industrial Unit, the assessee has shown the profit of 94.8% for the assessment year 1999- 2000 with an investment of Rs.2,06,000/- on the computers is not acceptable - As for the assessment years 2000-2001 and 2001-2002 also they have shown the turnover of Rs.2,15,41,550/- and Rs.1,82,82,043/-. Hence, it is very difficult to doubt the genuineness of the business activities of the software carried on by the assessee at Silvassa - in favour of assessee Payment made for acquiring the name of ‘VESESH’ and intellectual properties, copy right - capital receipt OR revenue expenditure - Held that:- At any stretch of imagination that amount cannot be treated as revenue expenditure only to get the brand name and restrain M/s.Seshadri Group from doing business with assessee’s customers. The said amount has to be treated as capital expenditure. Hence, the assessee is not entitled for deduction in the litigation expenditure. The order passed by the Appellate Tribunal allowing deduction of Rs.19,00,000/- as revenue expenditure is contrary to law - against assessee.

  ---

• 2012 (9) TMI 69
  Reopening of the assessment - exemption u/s 10(23G) has been wrongly granted - had the interest been earned on long term finance as defined in section 10(23G) r.w.s. 36(1)(viii), the investment would have been classified in Schedule 8 of Balance Sheet as “Loans and Advances” and not as “investment” in Schedule 5 as shown by assessee - Held that:- The assessee put forth his claim for exemption u/s 10(23G) with respect to three different incomes, namely, (1) interest from SSNNL bonds, (2) interest from GIPCL bonds, and (3) capital gain from sale of shares by GPEC being supported by the notes forming part of the return of income. It is not as if the AO did not notice these claims. In fact, the AO asked the assessee to justify all the claims and the assessee gave detailed reply to the query raised with respect to capital gain. The assessee, thereafter, contended that such justification would apply with respect to interest on the bonds also. As if for some reason the AO was not satisfied with such explanation, surely it was open for him to call for further explanation. In the final order of assessment, it is not as if the Assessing Officer totally lost sight of such claims. He in fact took into account the fact that the assessee was claiming exemption on the interest income from the bonds. He, therefore, examined as to what extent expenditure for earning such tax free income should be disallowed. In the order of assessment, he gave detailed reasons why a portion of the expenditure relating to earning tax free interest should be disallowed, thus in the reasons which the AO recorded for reopening the assessment, he based his case on wrong exemption of interest from SSNNL/GIPCL Bonds claimed under section 10(23G)such reopening would be based on a mere change of opinion - the reasons of AO started with the words, “from the records, it can be seen that .....” , thus the entire information and the material that the AO, therefore, had at his command was reflected from the record itself. This coupled with the fact that in the original assessment, the Assessing Officer examined such claims in detail, would convince that any reopening of the assessment of same claims on the basis of same material, amounts to a mere change of opinion - thus notice was issued without jurisdiction - in favour of assessee.

  ---

• 2012 (9) TMI 68
  Inclusion of unrealized export turnover in the "Total Turnover" while it is not treated as "Export Turnover" for purposes of computing the allowable deduction u/s 80HHC - Held that:- Even if the unrealised sale proceeds is deducted as proportionate to the business profit and the total turnover the result would be the same when deduction under Section 80HHC is computed by reducing the export turnover by unrealised portion of export turnover, thus the contention of the assessee that unrealised portion should be deducted from the total turnover as well as from the export turnover would be contrary to the provisions of the Act. As the assessee had total turnover of Rs.1,01,20,167. Going by the definition of the "export turnover" meaning thereby the sale proceeds received in or brought into India by the asessee , necessarily the same has to be the assessee's actual receipt of sale proceeds i.e export turnover of Rs.91,20,802/-. Taking the actual foreign exchange received excluding a sum of Rs.9,26,324/- alone would represent the export turnover of the assessee. Going by the reasoning of this court and the definiton of "export turnover" no hesitation in confirming the order of the Tribunal - the computation of profits of the business is one thing and the computation of export turnover as defined in Section 80HHC Explanation (b), has to be in respect of sale proceeds received or brought in India in convertible foreign exchange and in contrast to this the total turnover as observed by this Court has to be in respect of the goods which are exported out of India - against assessee. Direction to consider the assessee's plea for allowance of the claim for bad debt since the foreign buyer refused to remit the sale proceeds for the exported goods and the Indian Embassy in Paris also informed the difficulties in realising the same.

  ---

• 2012 (9) TMI 67
  Transfer pricing adjustment - adjustment on account of payments of Management Fees, selling commission and reimbursement of expenses - Held that:- Considering submission of several documents to substantiate the actual rendition of services for which payment of management fee and sales commission was made by the Appellant Company to its associated enterprise depicts that the Appellant Company has actually received services from its associated enterprise for which management fee has been paid. Further, these documents also substantiate that the services received by the Appellant Company from its associated enterprise are substantial in nature. As the additional grounds of appeal filed by the assessee are admitted for adjudication and all these issues require thorough examination and verification of data filed and likely to be called for the additional evidence and connected issues be restored back to the file of the Assessing Officer for de novo consideration - in favour of assessee for statistical purposes.

  ---

• 2012 (9) TMI 66
  Mode of computation of ALV of House - dis allowing deduction of interest from house property income as the same interest is taxed under the head income from other sources also - Held that:- Assessee was receiving a monthly rent of Rs. 2,20,000/- upto 30.7.1999 & thereafter the assessee received an interest free deposit of Rs. 2.25 crores from the licencee. That assessee’s share in the interest free deposit at Rs. 45 lakhs, was deposited in the Savings Bank account with Standard Chartered bank which was simultaneously transferred to the fixed deposit account with Standard Chartered bank on 4th August, 1999. For the period from 1.8.1999 to 31.3.2000, the assessee received interest income of Rs. 2,70,000/- which has been offered for tax under the head ‘ income from other sources’. Considering these facts the direct nexus has been established by the assessee - the lower authorities have not brought anything on record to establish that the rent & interest free deposit was a sham transaction to circumvent real rent. As decided in Sundeep Exports (P) Ltd. Versus ITO [2011 (2) TMI 316 - ITAT, Mumbai ] ALV adopted by Municipal rateable value should be the determining factor for applying provisions of Sec. 23(1)(a) - Thus the ALV adopted by the municipal authorities should be taken into consideration and the matter is restored back to the file of the AO to verify the Municipal rateable value of the property and if the actual rent received by the assessee is more than the municipal rateable value, then to adopt the actual rent of the ALV of the property. Disallow deduction on interest from house property income - Held that:- As the same interest has been taxed under the head income from other sources also there is a direct nexus of interest received on Fixed deposit vis-à-vis the security deposit, therefore the same interest cannot be considered for computing house property income more so we have also held that ALV has to be determined as per the municipal rateable value or actual rent whichever is higher. Determination of the annual let out value of 7 flates at Sunbeam building - Held that:- Municipal rateable value shall be taken into consideration for determining the ALV comparing it with the actual rent whichever is higher shall be taken it as income under the head income from house property. Applying the same principle, the matter is restored back to the file of the AO directing the AO to verify the municipal rateable value of 7 flats - appeal in favour of assessee for statistical purposes.

  ---

• 2012 (9) TMI 65
  Addition income from sale of scarp on ship breaking - revenue appeal against ITAT as ships broken by the assessee justified the generation of scrap at 0.81% only? - Held that:- 0.81 % of the total recovery being attributed to non ferrous scrap generated during the course of ship breaking by the respondent assessee was correct as the respondent assessee had maintained excise record and its books were audited and the department does not challenge the purchases and sales reflected in the respondent's books of accounts - as between 0.90% to 1.40% of non ferrous scrap being generated out of the total scrap on the activity of ship breaking has been accepted by the department upto the Assessment Year 1990- 91. Appeal of revenue is also cannot be accepted as the tax effect in the present appeal would be only Rs.5.69 lacs & the Revenue cannot to file appeals under Section 260A in cases where the tax effect is less than Rs.10/- lacs - in favour of assessee.

  ---

• 2012 (9) TMI 64
  Reassessment proceedings - income has not been correctly computed u/s. 115JB - brought forward depreciation was not be set off along with the current years depreciation against the allowable business profits before allowing exemption u/s. 10B - Held that:- As decided in Apollo Tyres Ltd. Versus CIT [2002 (5) TMI 5 - SUPREME COURT] the Assessing Officer while assessing a company for income tax under section 115J of the Act, cannot question the correctness of the profit and loss account prepared by the assessee company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Schedule VI of the Companies Act. For computing deduction u/s 10B the decision of the Tribunal in assessee’s own case is relevant that in the context of provisions of section 115J the book profit estimate under section 115J has to be made on the basis of depreciation calculated in accordance with Schedule VI to the Companies Act, 1956 and not as per the provisions of the I.T. Act. As for the purpose of computation under the normal provision of the Act the case laws relied upon by the Ld. Departmental Representative are applicable and accordingly,that the for the purpose of normal computation of income, Assessing Officer’s action in this case has to be sustained - partly in favour of Revenue.

  ---

• 2012 (9) TMI 63
  Addition on mismatching of TDS receipts with P&L account - unaccounted income - CIT(A) deleted the addition - Held that:- The AO has erred in considering all the amounts received by the assessee company from airlines (towards commission) & from Clients (towards reimbursement of expenses) as income and erred in adding back a sum of Rs. 48,99,461/- as income on account of commission and sum of RS. 24,10,732/- on account of contract income. Assessing Officer has considered the entire payment as per TDS certificate as income and has failed to appreciate what is liable is income, real profit and not payment received by the assessee. Thus agreeing with the CIT(A)'s view that the payment received on account of freight cannot be considered to be the income of the assessee as it is a receipt against liability incurred, thus additions made by the AO cannot be sustained on this account. That assessee has been following this method of accounting consistently and the department has been accepting the same, thus as per sec. 145, the income must be computed in accordance with the method of accounting regularly employed by the assessee - in favour of assessee.

  ---

• 2012 (9) TMI 62
  Scope of Section 154 – assessee seeking rectification of order u/s 154 of assessment order passed u/s 115WE(3) levying fringe benefit tax on ESOP scheme of the assessee company on ground that levy of fringe benefits tax on ESOP/sweat equity is provided only from the AY 2008-09 – dismissal of rectification plea by AO, confirmed by CIT(A) – AY 07-08 - Held that:- The AO has taken a conscious decision to bring the ESOP expenditure to fringe benefits tax while computing taxable fringe benefits while passing the assessment order u/s 115WE(3). Therefore, the AO rightly rejected the rectification petition filed by the assessee, since it is not a mistake apparent from record within the meaning of section 154 as the taxability or otherwise of an ESOP expenditure u/s 115WB(1)(a) is highly debatable issue and such issue cannot be adjudicated in the proceedings u/s 154 and it is beyond the scope of section 154. Therefore, we confirm the order of the CIT (Appeals) – Decided against assessee.

  ---

• 2012 (9) TMI 61
  Rental Income from complex - Revenue contending the same to be 'business income’ and consequential dis-allowance of interest, house tax, statutory allowance of 30% on ground that main object of company was to deal with the real estate, and assessee was not a simplister owner of a property, which has been given on rent - Held that:- Once assessee is owner of a building and has earned rental income, the same has to be treated as income from house property because specific head, dealing with income on house property is available. As far as the deduction on account of house tax and interest is concerned, the same are deductible even under the head ‘income from business or profession’. Order of CIT(A) confirmed - Decided in favor of assessee Agricultural Income - Revenue contending the same to be 'Income from other sources' and denied exemption u/s 10(1) on ground that land was basically purchased for real estate activities and was given on lease to various parties - Held that:- Lands in question have been used for the purposes of agricultural operations and these lands are owned by the assessee company. It is also a matter of record that assessee is in receipt of lease/rent charges from the persons who have carried out the agricultural operations on the land. As such, the amounts received by the assessee are squarely covered under the definition of agricultural income as defined in S.1(1A)(a). The said agricultural income is exempt in view of S.10(1) - Decided in favor of assessee

  ---

• 2012 (9) TMI 60
  Adhoc addition made towards trading results – decline in G.P. rate by 0.07% - overvaluation of stock - Held that:- Over valuation of closing stock cannot be a reason for making addition to the trading results because over valuation would itself result into higher profits. Similarly, the figure of opening stock can also not be interfered. No other specific defect has been pointed out by the AO and addition seems to be merely on adhoc basis, which cannot be made as per the law. Deletion of addition made on estimation basis is directed. Addition u/s 40(a)(ia) – non-deduction of tax at source from Freight Charges – assesse placing reliance on Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) – Held that:- It is not clear from records whether the amount was paid during the year or not. Matter remitted back to file of AO Addition on account of low Household withdrawals – Held that:- In the present inflationary times, some minimum withdrawals are required by everybody. Since no details of withdrawals have been furnished, addition of Rs.1,00,000/- is restricted to Rs.50,000/- - Decided partly in favor of assessee

  ---

• 2012 (9) TMI 59
  Deduction u/s. 10B of the Income-tax Act - whether when computing the relief under Section 10-A of the Income-tax Act, 1961 the amount of communication expenses/freight, insurance, telecommunication expenses and expenses incurred in foreign currency should be excluded from the total turnover for the same are reduced from export turnover - Held that:- While computing the consideration received from such export turnover, the expenses incurred towards freight, telecommunication charges, or insurance attributable to the delivery of the articles or things of computer software outside India, or expenses if any incurred in foreign exchange in providing the technical service outside India should not be included - in favour of the assessee

  ---

• 2012 (9) TMI 58
  Reassessment – after four years – alleged that income chargeable to tax for the assessment year 2003-04 has escaped assessment - non-disclosure by the assessee of its holding in SDBL for the relevant assessment year – Held that:- While during the course of inquiry, the assessee was asked to submit such details, through which, it was found that the assessee holds 22.3 per cent. of the shares of SDBL - petitioner has failed to disclose these details with regard to SDBPL during original assessment proceedings - no details/evidence produced by the petitioner on the issue of deemed dividend – reassessment upheld

  ---

• Customs

• 2012 (9) TMI 82
  Disentitlment to the benefit of the DEPB credit - the shipment could not be completed by a cut-off date for the “Let Export Order” mentioned by the circular dated 22-9-2011, i.e 30th September, 2011 - Held that:- The petitioner is disentitled to the benefit of the DEPB scheme by virtue of a restriction imposed on 22-9-2011, made effective nine days later. To inflict such an arbitrary condition, which is declared to be legally unsustainable, and yet insist that during the interregnum a fresh condition operates to deny the citizen the relief he is justly entitled to, is unfair and unreasonable. Furthermore the respondents are also wrong in contending that the issuance of the Tribunal’s order on 8-12-2001 does not constitute a “valid reason” in terms of the circular dated 22-9-2001 warranting manual endorsement on the LEO after 30-9-2011. In this case, the goods were neither detained, nor were subject to proceedings which culminated in any assessment order, in these circumstances, the insistence that the petitioner continue to maintain a bank guarantee for Rs. 2 crore is unwarranted. The customs authorities did not show how this condition, in addition to the bond insisted in the case of the shipment, was essential as the samples necessary for the investigation and issuance of show cause notice, if any, had been drawn. The goods were exported and the consideration was received in respect of the earlier shipments covered by the three bills bank realization certificate towards export proceeds in respect of the said shipping bills were received on 06.07.2011. In the circumstances, it would be unreasonable and unfair for the respondents, to continue to insist that the Bank guarantee for the amount of Rs. 2 crores should be maintained - the respondents are directed to treat the export in respect of the shipping bill dated 15-6-2011 as eligible to benefit of the DEPB scheme, and having been exported under it, on LEO basis - in favour of assessee.

  ---

• 2012 (9) TMI 81
  Writ petition - demanding release of the bank guarantees and also refund of the amount pre-deposited in terms of the order of the Tribunal - alleged that the respondent authorities are withholding release of the bank guarantees as well as refund of pre-deposit – Held that:- Decision of the Tribunal having assumed finality, is not open to the respondent authorities to either withhold release of the bank guarantees or to withhold refund - respondent authorities directed to forthwith release the bank guarantees and further to refund the deposit

  ---

• 2012 (9) TMI 80
  Demand of duty - appellants had not fulfilled the export obligation in terms of quantity of the goods to be cleared under the export licence – Held that:- Export obligation falling short in terms of quantity. There is no allegation in the show cause notice or finding in the order-in-original that the goods imported for fulfilling the export obligation had been diverted for some other purposes. In the absence of any evidence that the appellants had diverted duty free import for any other purposes for fulfilling the export obligation - penalty under Section 112 of Customs Act reduced

  ---

• 2012 (9) TMI 57
  Delay in Order of detention - 14 ½ months in executing the detention order - allegation of fraudulent exports made from Nhava Sheva Port - Held that:- If there is unreasonable delay in execution of the detention order, the same vitiates the order of detention. In the case on hand, though the appellant's brother-the detenu was released on bail on 11.11.2005, the detention order was passed only on 14.11.2006, actually, if the detenu was absconding and was not available for the service of the detention order, the authorities could have taken steps for cancellation of the bail and for forfeiture of the amount deposited. Admittedly, no such recourse has been taken. If the respondents were really sincere and anxious to serve the order of detention without any delay, it was expected of them to approach the court concerned which granted bail for its cancellation, by pointing out that the detenu had violated the conditions imposed and thereby enforce his appearance or production as the case may be. Admittedly, no such steps were taken instead it was explained that several attempts were made to serve copy by visiting his house on many occasions. In the absence of proper explanation for a period of 15 months in issuing the order of detention, the same has to be set aside. Since, we are in agreement with the contentions relating to delay in passing the Detention Order and serving the same on detenu, there is no need to go into the factual details - thus as the detention period has already expired, no further direction is required for his release. The appeal is allowed.

  ---

• Service Tax

• 2012 (9) TMI 104
  Demand of service tax along with confirmation of interest and imposition of penalty - alleged that appellants have received commission from cell phone – Held that:- Assessee submitted that the excess amount, which stands confirmed by the Revenue as commission, is actually the profit earned by them on account of sale of mobile phones, on which they have already paid sales tax - denial of benefit SSI exemption - assuming that the differential amount was not on account of sale/purchase of mobiles and that the total clearance value during the preceding financial year was more than Rs.4 lakhs - matter remanded to original adjudicating authority

  ---

• 2012 (9) TMI 103
  GTA services - Refund claim - rejected on ground export invoices numbers are not mentioned in the lorry receipt and the shipping bills as required under Notification 14/07-ST dated 6.10.07 as amended by Notification 3/2008-ST dated 19.2.2008 – Held that:- Case remitted to the original authority for verification of the of the claim of the Appellant on the use of GTA service in the export of goods by establishing a link between the lorry receipt and the export invoices and also the export invoices and shipping bills

  ---

• 2012 (9) TMI 102
  Business Auxiliary Services – appellant use Computerized Reservation System (CRS) of two companies - appellant and GIPL and Abacus have joined hands in marketing and promotion of GIPL’s and Abacus’s activities in India in exchange for support fee – Held that:- In view of the appellant’s agreement with GIPL and Abacus, their activity appears to be the marketing and promotion of the services being provided by the GIPL and Abacus and hence, the same appears to be covered by the definition of “Business Auxiliary Services” under Section 65(19) of the Finance Act, 1994

  ---

• 2012 (9) TMI 101
  Demand of service tax and penalty – rent-a-cab operator – Held that:- Appellant was issued a show cause notice without even giving him an opportunity to explain the situation - appellant had taken registration in May 2004 and the fact that it did not own any vehicle in 2004-2005, there is a possibility that he could have entertained a bona fide belief about the liability of service tax - no evidence was produced before original adjudicating authority and Commissioner (Appeals) did not allow them to produce any evidence - matter remanded to original adjudicating authority with direction to give a reasonable opportunity to the appellant to produce the evidence

  ---

• 2012 (9) TMI 76
  Extended period of limitation – whether the cost of materials used in providing photographic services is required to be added in assessable value or not - Held that:- There was bona fide doubt about the inclusion of the cost of material in the cost of services - no mala fide can be attributable to the appellant so as to invoke the extended period of limitation

  ---

• 2012 (9) TMI 75
  Penalty - suo motu revision of order passed by learned Commissioner under Section 84 of the Finance Act, 1994 imposing penalty under section 77 of the said Act followed by penalty under Section 78 – Held that:- Appellant is not educated person. He did not find any cogent reason to have belief that no payment of tax was intentional and there was suppression of fact with intent to evade payment thereof. He did not notice such aspect while concluding adjudication - no necessity to appreciate the revisional order where the authority has only mechanically concluded that penalty ought to have been imposed. It appears that his order is indication of redundancy for which that is bound to be set aside. The appellant succeeds and appeal is allowed.

  ---

• 2012 (9) TMI 74
  Cenvat credit on GTA services – alleged that such credit of tax paid on such services of Goods Transport Agency was taken on documents that are not specified under Rule 9 of Cenvat Credit Rules, 2002 – Held that:- Rule 9 of the Cenvat Credit Rules does not specify any document based on which the person who is paying Service Tax from PLA account or Cenvat Credit Account as a receiver of service can take credit - matter remanded to the adjudicating authority for de novo consideration

  ---

• 2012 (9) TMI 73
  Demand of service tax – penalty - services of rent-a-cab operator – Held that:- Activities were covered under Section 65(91) read with Section 65(105)(o) of the Finance Act, 1994 and hence, the same attracted Service tax - adjudicating authority has confirmed the demand by calculating the Service tax at the applicable rate on the gross amount received by them without considering the exemption under Notification No. 2/06-S.T. - matter is remanded to the Commissioner for de novo adjudication after considering the appellant’s claim for exemption under Notification No. 2/06-S.T.

  ---

• Central Excise

• 2012 (9) TMI 106
  Reversal of CENVAT Credit availed of the Central Excise duty paid on capital goods as well as input services - Held that:- As the provisions of Rule 11 (3) of CENVAT Credit Rules, 2004 specifically provides for only reversal of CENVAT Credit taken on the duty paid on the inputs and the said rule is silent about the reversal of CENVAT Credit taken of Central Excise duty paid on capital goods as well as on the Service Tax paid on the input services - the appellant has made out a prima facie case for waiver of pre-deposit of balance amounts involved in this case - in favour of assessee.

  ---

• 2012 (9) TMI 79
  Waiver of pre-deposit – Cenvat credit – Held that:- KPIPL had never taken any delivery of material and they had never manufactured PVC compound and PVC Master Batches, which were allegedly sold to appellant - appellant had during this period allegedly purchased several consignments of PVC compound, etc. from KPIPL and had also availed cenvat credit - appellant shall deposit 50% of the cenvat credit

  ---

• 2012 (9) TMI 78
  Non-reversal of cenvat credit in respect of inputs lying in opening stock at time of switching from paying duty at concessional rate under Notification No.1/93-CE to full duty exemption under Notification No.16/97-CE w.e.f. 1.4.97 - Held that:- Admittedly, appellant have not reversed the cenvat credit pertaining to inputs in stock or in process as on 31.3.1997; despite having availed the benefit of exemption notification No.16/97 from 1.4.97, which is a notification based on the value of clearances in a FY. Hence, in view of this under the provisions of sub-rule (7) of Rule 57H, at the time of opting for this exemption w.e.f. 1.4.97, the appellant were required to reverse the cenvat credit on the inputs in stock or in process or contained in the finished product lying in stock. Thus, the provisions of Rule 57H(7) are applicable to the appellant. Since the correct facts had been narrated in the SCN hence citation of Rule 57C and not Rule 57H(7), would not vitiate the SCN. Cenvat credit demand upheld. Further, in view of condition (i) of the Notification No. 16/97-CE, the option to avail of the exemption has to be made before effecting first clearances in a FY and such option once exercised, shall be final and cannot be withdrawn in the same FY under any circumstances. Therefore, their plea that if allowed to opt out of the exemption w.e.f. 1.4.97, their net duty liability would be only Rs. 1,21,712/- is without any merit - Decided against assessee

  ---

• 2012 (9) TMI 77
  Pre-fabricated segments and launching trusses - falling under Heading 8425 of the Central Excise Tariff - Demand of duty, interest and penalty thereon - Held that:- As the launching trusses are trusses, which are steel structures fabricated from structural steel, with sophisticated equipment, moving forward on bridge piers span by span and are used for placing pre-fabricated segments on the piers the Commissioner in his order does not discuss as to how a launching truss, which is a giant steel structure, is covered by 8425 which defines "Pully tackles and hoists, other then skip hoists; winches and capstans, Jacks". As decided in MAHINDRA & MAHINDRA LTD. Versus C.C.E., AURANGABAD, CHANDIGARH, KANPUR & CHENNAI [2005 (11) TMI 103 - CESTAT, NEW DELHI] trusses are classifiable under heading no.73.08. Claim for exemption under Notification no.3/05-CE dated 24.2.2005 - Held that:- As the Commissioner in his impugned order has not discussed the eligibility of the launching trusses for. notification no. 3/05-CE, probably for the reason as according to him launching trusses as classifiable under 8425 to which this notification is not applicable. But since the goods have been held to be classifiable under 73084000, the eligibility for notification no. 3/05-CE would have to be considered for which it has to be ascertained - and the matter is remanded to Commissioner for denovo adjudication - set aside the duty demanded - in favour of assessee.

  ---

• 2012 (9) TMI 56
  Plea by Revenue for condonation of delay in filing the appeal by 128 days - order expanding scope of exemption Notification N.52/2003-Cus. dated 31.03.2003, issued on 06.07.2011 and corrigendum issued on 17.8.2011 - Revenue contended that delay occurred due to fact of examination at later stage and appeal involves a substantial question of 1aw - Held that:- It can be noticed that the reasons given are not justifiable as the very same order in appeal contained everything and which has been adjudicated and accepted that the impugned order was issued on 6.07.11 and the corrigendum was issued on 17.08.11. The points which sought to be urged were already present when the impugned order was received by the lower authorities. Accordingly, application for condonation of delay is dismissed - Decided against Revenue

  ---

• 2012 (9) TMI 55
  Plea for condonation of delay of one year seven months by Department - appeal was earlier not preferred against order on ground that impugned order was based on decision, SLP against which was dismissed by the Supreme Court, hence decision has been confirmed by Supreme Court - appeal however later preferred based on the view taken by Tribunal in case of CCE, Jallandhar vs. A.G. Flats Ltd.(2011 (7) TMI 968 - CESTAT, NEW DELHI) that dismissal of civil appeals In-Limine by Supreme Court without adverting to the facts and without giving reasons could not be taken as the law laid down by Supreme Court - Held that:- Once the Committee of Commissioners after considering the factual and legal aspect have decided not to prefer appeal against the impugned order, the order has attained finality. As such, the issue now cannot be reopened only because in a subsequent judgment, the Tribunal has taken view that in-limine dismissal of appeal by the Supreme Court does not lay down any law - appeals dismissed.

  ---

• CST, VAT & Sales Tax

• 2012 (9) TMI 105
  Registration of Developers - Held that:- The time for registration by the developers as per clause (1) of the Trade Circular dated August 6, 2012 shall stand extended up to October 15, 2012 and the time for filing returns by the developers as per clause (m) of the said circular shall stand extended up to October 31, 2012. As per amendment in section 2(24) of Maharashtra Value Added Tax Act, 2002 w.e.f. June 20, 2006 on or before October 31, 2012, the coercive process for recovery of tax, interest or penalty shall remain stayed in case the concerned developers and in case the amendment is held to be unconstitutional and the tax so deposited is ordered to be returned by the State Government the same shall be returned along with interest at such rate that may be ordered by the court finally at the time of disposal of the matter.

  ---